Equity Method, Eliminating Entries, Several Years After Acquisition

Data for PlanetTwo Communications and its wholly-owned subsidiary, Stage 4 Networks, are given below. PlanetTwo acquired Stage 4 on January 1, 2020. PlanetTwo uses the complete equity method to report its investment in Stage 4, and its accounting year ends December 31.

(in thousands)
Acquisition cost	$25,000
Stage 4s shareholders equity, January 1, 2020	6,000
Stage 4s total reported net income, 20202023	11,000
Stage 4s total dividends paid, 20202023	4,000
Stage 4s reported net income, 2024	500
Dividends declared and paid by Stage 4, 2024	200
Allocation of excess of cost over book value to identifiable net assets, at acquisition date:
Land	800
Buildings (15-year life, straight-line)	(1,500)
Identifiable intangibles (4-year life)	2,000
Long-term debt premium (5 years to maturity as of January 1, 2020	100
Goodwill impairment loss, 20202023	300
Goodwill impairment loss, 2024	0

Required

a. Calculate the original goodwill reported for this acquisition.

$Answer

(in thousands)

b. Calculate the equity in net income for 2024, reported on PlanetTwos books, using the complete equity method.

$Answer

(in thousands)

c. Calculate the balance in Investment in Stage 4 Networks at December 31, 2024, reported on PlanetTwos books.

$Answer

(in thousands)

d. Prepare the eliminating entries necessary to consolidate the financial statements of PlanetTwo and Stage 4 for 2024.

Enter answers in thousands.

Ref.	Description		Debit	Credit
(C)	AnswerEquity in net income of Stage 4Dividends - Stage 4Shareholders' equity - Stage 4Investment in Stage 4		Answer	Answer
	AnswerEquity in net income of Stage 4Dividends - Stage 4Shareholders' equity - Stage 4Investment in Stage 4		Answer	Answer
	Investment in Stage 4		Answer	Answer
(E)	AnswerEquity in net income of Stage 4Dividends - Stage 4Shareholders' equity - Stage 4Investment in Stage 4		Answer	Answer
	AnswerEquity in net income of Stage 4Dividends - Stage 4Shareholders' equity - Stage 4Investment in Stage 4		Answer	Answer
(R)	Land		Answer	Answer
	AnswerBuildings,netDepreciation expenseGoodwillGoodwill impairment lossInterest expenseLandLong-term debt		Answer	Answer
	AnswerBuildings,netDepreciation expenseGoodwillGoodwill impairment lossInterest expenseLandLong-term debt		Answer	Answer
	Buildings, net		Answer	Answer
	Investment in Stage 4		Answer	Answer
(O)	Buildings, net		Answer	Answer
	AnswerBuildings,netDepreciation expenseGoodwillGoodwill impairment lossInterest expenseLandLong-term debt		Answer	Answer
	Depreciation expense		Answer	Answer
	AnswerBuildings,netDepreciation expenseGoodwillGoodwill impairment lossInterest expenseLandLong-term debt		Answer	Answer